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HELD: NO.
Without deciding whether notice of other insurance upon the same property must be given
in writing, or whether a verbal notice is sufficient to render an insurance valid which requires
such notice, whether oral or written, the SC held that in the absolute absence of such notice
when it is one of the conditions specified in the fire insurance policy, the policy is null and
void. Since the policy is null and void, plaintiff cannot recover from the defendants
insurance companies.
The SC upheld the finding of the trial court that the policies provide that no other insurance
should be admitted upon the property thereby assured without the consent of said
companies duly given by endorsement.
Ang Giok Chip v Springfield G.R. No. L-33637 December 31, 1931
J. Malcolm
Facts:
Ang insured his warehouse for the total value of Php 60,000. One of these, amounting to 10,000,
was with Springfield Insurance Company. His warehouse burned down, then he attempted to
recover 8,000 from Springfield for the indemnity. The insurance company interposed its defense on
a rider in the policy in the form of Warranty F, fixing the amount of hazardous good that can be
stored in a building to be covered by the insurance. They claimed that Ang violated the 3 percent
limit by placing hazardous goods to as high as 39 percent of all the goods stored in the building. His
suit to recover was granted by the trial court. Hence, this appeal.
Issue: Whether a warranty referred to in the policy as forming part of the contract of insurance and
in the form of a rider to the insurance policy, is null and void because not complying with the
Philippine Insurance Act.
Ratio:
The Insurance Act, Section 65, taken from California law, states:
"Every express warranty, made at or before the execution of a policy, must be contained in the
policy itself, or in another instrument signed by the insured and referred to in the policy, as making a
part of it."
Warranty F, indemnifying for a value of Php 20,000 and pasted on the left margin of the policy
stated:
It is hereby declared and agreed that during the currency of this policy no hazardous goods be stored
in the Building to which this insurance applies or in any building communicating therewith,
provided, always, however, that the Insured be permitted to stored a small quantity of the hazardous
goods specified below, but not exceeding in all 3 per cent of the total value of the whole of the
goods or merchandise contained in said warehouse, viz; . . . .
Also, the court stated a book that said, "any express warranty or condition is always a part of the
policy, but, like any other part of an express contract, may be written in the margin, or contained in
proposals or documents expressly referred to in the policy, and so made a part of it."
“It is well settled that a rider attached to a policy is a part of the contract, to the same extent and
with like effect as it actually embodied therein. In the second place, it is equally well settled that an
express warranty must appear upon the face of the policy, or be clearly incorporated therein and
made a part thereof by explicit reference, or by words clearly evidencing such intention.”
The court concluded that Warranty F is contained in the policy itself, because by the contract of
insurance agreed to by the parties it was made to be a part. It wasn’t a separate instrument agreed to
by the parties.
The receipt of the policy by the insured without objection binds him. It was his duty to read the
policy and know its terms. He also never chose to accept a different policy by considering the earlier
one as a mistake. Hence, the rider is valid.
Facts:
The purpose of the present action is to recover the sum of P3,000 upon an insurance policy. The
lower court rendered a judgment in favor of the plaintiff and against the defendant for the sum of
P2,708.78, and costs. From that judgment the defendant appealed to this court.
The undisputed facts upon which said action is based are as follows:
The plaintiff occupied a building at '321 Calle Claveria, as a residence and bodega (storehouse). On
the 29th of May, 1912, the defendant, in consideration of the payment of a premium of P60, entered
into a contract of insurance with the plaintiff promising to pay to the plaintiff the sum of P3,000, in
case said residence and bodega and contents should be destroyed by fire. One of the conditions of
said contract was that no hazardous goods be stored or kept in the building.
On the 4th or 5th of February, 1913, the plaintiff placed in said residence and bodega three boxes
which belonged to him and which were filled with fireworks for the celebration of the Chinese new
year.
On the 18th day of March, 1913, said residence and bodega and the contents thereof were partially
destroyed. Fireworks were found in a part of the building not destroyed by the fire; that they in no
way contributed to the fire, or to the loss occasioned thereby.
Issue:
Whether or not the placing of said fireworks in the building insured, under the conditions above
enumerated, they being "hazardous goods," is a violation of the terms of the contract of insurance.
Held:
Yes.
The word "stored" has been defined to be a deposit in a store or warehouse for preservation or safe
keeping; to put away for future use, especially for future consumption; to place in a warehouse or
other place of deposit for safe keeping. Said definition does not include a deposit in a store, in small
quantities, for daily use. "Daily use" precludes the idea of deposit for preservation or safe keeping, as
well as a deposit for future consumption or safe keeping.
A violation of the terms of a contract of insurance, by either party, will constitute the basis for a
termination of the contractual relations, at the election of the other. The right to terminate the
contractual relations exists even though the violation was not the direct cause of the loss. In the
present case, the deposit of the "hazardous goods," in the building insured, was a violation of the
terms of the contract. Although the hazardous goods did not contribute to the loss, the insurer, at
his election, was relieved from liability Said deposit created a new risk, not included in the terms of
the contract. The insurer had neither been paid, nor had he entered into a contract, to cover the
increased risk.
Contracts of insurance are contracts of indemnity, upon the terms and conditions specified therein.
Parties have a right to impose such reasonable conditions at the time of the making of the contract
as they deem wise and necessary. The rate of premium is measured by the character of the risk
assumed. The insurer, for a comparatively small consideration, undertakes to guarantee the insured
against loss or damage, upon the terms and conditions agreed upon, and upon no other. When the
insurer is called upon to pay, in case of loss, he may justly insist upon a fulfillment of the terms of
the contract. If the insured cannot bring himself within the terms and conditions of the contract, he
is not entitled to recover for any loss suffered. The terms of the contract constitute the measure of
the insurer's liability. If the contract has been terminated, by a violation of its terms on the part of
the insured, there can be no recovery. Compliance with the terms of the contract is a condition
precedent to the right of recovery. Courts cannot make contracts for the parties. While contracts of
insurance are construed most favorably to the insured yet they must be construed according to the
sense and meaning of the terms which the parties themselves have used. Astute and subtle
distinctions should not be permitted, when the language of the contract is plain and unambiguous.
Such distinctions tend to bring the law itself into disrepute.
The judgment of the lower court is revoked and the defendant is relieved from any responsibility
under said complaint, and, without any finding as to costs.
American Home Assurance Company v. Tantuco Enterprises
Facts:
Tantuco Enterprises (Tantuco) was a domestic corporation engaged in the manufacture of
coconut oil. It maintained two coconut oil mills (old and new) for the purpose of its business. These
two buildings were covered under fire insurance policies issued by American Home Assurance
Company (American) – the one being insured for Php 3 million and the new one for Php 6 million.
One night, the new mill was gutted by fire. Afterwards, Tantuco sent a letter to American
claiming for the insurance proceeds under the fire insurance policy issued by the latter. But
American declined the claim, stating that no insurance policy was issued to cover the new one, because the
two insurance policies issued in favor of Tantuco were for the old one.
Thus, a complaint for specific performance with claims for damages was filed by Tantuco
with the Regional Trial Court (RTC), which rendered a decision in favor or Tantuco, directing
American to pay Tantuco the insurance proceeds. This decision was affirmed by the Court of
Appeals (CA). Hence, the petition for review with the Supreme Court (SC).
American argued that the insurance policy which purportedly covered the new mill
contained not the description of the new mill but of the old mill. Thus, since the insurance contract is
the law between the parties, it should be interpreted that the parties’ intention was to insure the old
mill, not the new mill. Also, granting the description in the policy was incorrect, Tantuco failed to
bring the matter to American, despite the fact that it had already been 3 years from the time of the
perfection of the contract. It was argued that Tantuco was already in estoppel.
Issue:
Is the argument of American tenable?
Facts:
Olivia Yap was the owner of a store in a 2 storey building where she sold shopping bags and
footwears. Chua Soon Poon, Yap’s son-in-law was in charge of the store. Yap took out a Fire
Insurance from Pioneer Insurance (PISC) with a face value of 25K covering her stocks, office
furnitures, etc. Among the conditions in the policy was the co-insurance clause wherein without the
consent of PISC, no other insurance may be availed of by Yap. A violation of such condition results
to the nullity of the insurance. Nonetheless, two other insurance was taken by Yap for the same
property, these are: 1) For P20K with Great American insurance with the consent of PISC; and 2)
For P20K with Federal Insurance without the written consent of PISC.
One fateful night, a fire broke out in the building. Upon claim by Yap of the insurance
proceeds, PISC denied on the ground that there has been a violation of the co-insurance clause.
RTC and CA ruled in favor of Yap.
Issue:
WON PISC should be absolved from liability on the Fire Insurance on account of the
violation of the co-insurance clause.
Ruling and Discussion:
Yes, PISC is absolved from its liability by reason of Yap’s violation of the co-insurance
clause contained in the Policy.
Additional insurance, unless consented to, or unless a waiver was shown, ipso facto avoided
the contract, and the fact that the company had not, after notice of such insurance, cancelled the
policy, did not justify the legal conclusion that it had elected to allow it to continue in force. The
reason behind such requirement is to prevent over-insurance and thus avert the perpetration of
fraud.
In the instant case, it is without doubt that the insured has taken up another insurance with
Federal Insurance over the same property and over the same risk without the consent of PISC.
Hence, Yap violated the conditions of the policy resulting to PISC being absolved of its liability.
Issue:
Whether or not General Insurance can refuse to pay the proceeds.
Held:
Yes.
Violation of the statement which is to be considered a warranty entitles the insurer to rescind the
contract of insurance. Such misrepresentation is fatal.